ADB’s new president and his agenda for change

Newly minted Asian Development Bank President Takehiko Nakao (middle) at the venue of the ADB annual meeting in New Delhi, India. Photo by: ADB

In a par-for-the-course move — plus ca change, plus c’est le meme chose (or the more things change, the more they stay the same) — long-time Japanese finance official Takehiko Nakao was elected on April 28 as the ADB’s 9th president by the bank’s Board of Governors.

The selection was a foregone conclusion as no other nominees had emerged despite some talk of a possible challenge by China to the five decade-old tradition of a Japanese national holding the institution’s top job.

Once again, the latest ADB leader from Japan has the opportunity to bring the bank into the modern world and elevate the organization above the politics, governance shortcomings and backroom deals that too often characterize much of Asia.

And therein remains the challenge, and the opportunity, for the new ADB president: How to ensure that the multilateral development bank remains relevant to Asia at a time when the region is changing faster than the bank itself.

Nakao also begins his term against a backdrop of troubled working relations between China and Japan, the world’s second and third largest economies, over exchange rates and historical wrongs, as well as territorial disputes among a range of Asian nations, and a belligerent North Korea.

During my time as a member of the ADB Board of Directors, some of the most challenging discussions stemmed from territorial disputes intruding on the bank’s work. In one case, ADB efforts to help some of the poorest of the poor in an area known in India as Arunachal Pradesh, but claimed by China, were stymied.

Even if Nakao is not the new and different kind of leader adopted in recent years by the International Monetary Fund and the World Bank — former French finance minister Christine Lagarde became the first woman to head the IMF in July 2011, and Jim Yong Kim became the first Asian-American and health expert to take over the World Bank presidency in 2012 — the opportunity remains for him to bring a needed breath of fresh air and greater accountability to the ADB’s bureaucracy.

One critical change will be placing greater emphasis on development effectiveness and less emphasis on lending volume. Doing so will improve the ADB’s reputation, impact and relevance. That means understanding and embracing internally and externally that ADB is more than about the money.

Three issues in particular come to mind and Nakao may well find useful for improving the ADB’s relevance. I refer to them as the three P’s of responsible development: namely a focus on people, planet and partnership.

First, a renewed focus of the bank on assisting the poorest people in the region’s least developed nations will be an important step forward in ensuring the bank’s relevance.

As nations such as China are increasingly able to attract foreign capital and investment, there is less and less a case for ADB financial assistance to them, and they, like South Korea and other developed Asian nations before them, should “graduate” from multilateral bank financing assistance. ADB efforts — and central bank policies — must not be a means of enabling nations to put off making the tough decisions required to further open and develop their own capital markets.

This focus on people would also mean Nakao and his leadership team should embrace longstanding recommended changes to the ADB’s management of its own people. Specific changes would include steps toward better retention and advancement of qualified female staff as well as ensuring that the institution’s budget, personnel and management systems are overseen by qualified staff chosen based on experience and ability, not nationality.

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Second, the bank must do more to ensure that development efforts are done with greater understanding of their impact on our environment and planet. This will mean strict enforcement of ADB environmental and social safeguards.

A case in point is Myanmar. With the European Union and the U.S. having suspended or lifted most of their sanctions on trade and investment with Myanmar, and Japan having provided bridge loans and some $3.7 billion in write-offs of past bilateral loans to allow new international support and lending to resume, the World Bank and ADB have been quick to map out tens of millions of dollars in new development assistance to Myanmar. This eagerness to lend was underscored by one of then-ADB President Kuroda’s last official visits: a call on Myanmar President Thein Sein.

Hoping to be a major financier of energy, water and transport projects in Myanmar, the ADB under Nakao has an opportunity to shape more sustainable infrastructure investments and related policies and standards in that nation and elsewhere in the Asia-Pacific region. This includes strengthened and more transparent policies to safeguard or otherwise protect the environment and the lives of peoples who may well be relocated or otherwise impacted by Bank-supported projects.

And third, ADB’s new leadership would be wise to focus more on fostering partnerships, not just with the World Bank and the range of bilateral aid agencies, but also with critical stakeholders in civil society and the private sector. Individual partners, the ADB included, must in turn focus on areas of expertise and core competency and exit areas where others can do better.

Partnership with the private sector will also require a thorough assessment of the financial and human resources presently allocated to the ADB’s private sector operations.

At the end of the day, it is individual entrepreneurs and small and medium sized enterprises who will be the key drivers of growth and sustainable job creation in Asia, as they are in the rest of the world. At a time of constrained global financial resources and slow or no economic growth worldwide, this three-part agenda for change and relevance, with its focus on people, planet and partnership, will serve the ADB and the region well.

The world’s biggest challenges require a capacity to embrace change. That’s as true at the ADB as it is in the nations that the bank seeks to serve.

Now it is up to the latest Japanese president of the institution to prove the skeptics wrong. Let’s do more than hope – let’s all work with ADB President Nakao to make it happen.

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About the author

Curtis S. Chin is a former U.S. ambassador to the ADB (2007-2010) under U.S. presidents George W. Bush and Barack Obama. Presently, Chin is a senior fellow and executive-in-residence at the Asian Institute of Technology. He is also the managing director at RiverPeak Group.

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